Property policy changes will hit everyday Aussies where they live

[opinion piece published in The Daily Telegraph, 7 November 2018]

Property investors are mostly everyday Australians, spread across the community.

Treasury’s analysis bears this out. We know from tax office data that 71 per cent of property investors have just one investment property and a further 19 per cent have just two. Most investors have a taxable income of less than $80,000. These are not rich property barons — they’re everyday people making a modest investment to prepare for their future.

That’s where the facts stop and the questions begin. If Australia’s housing market is a $6.8 trillion sector, how will making big changes to tax policy affect it?

The Opposition proposes to limit negative gearing to newly constructed properties and increase capital gains tax by 50 per cent, while grandfathering existing arrangements.

The aim is to help housing affordability, cool an overheated investment market and raise new tax revenue. But what would be the economic impact if these tax changes were to come into force?

How many future investors would be dissuaded from investing with these increases? And what would happen to rents? After all, every person who rents needs an investor to provide a roof over their heads.

Labor’s policy assumes that house prices would drop enough to convert renters into buyers, but what if it doesn’t and the rental demand outstrips supply?

And with prices falling and construction levels slowing, what are the risks with making such fundamental changes?

Since the end of the mining boom, the economy has relied on construction to provide jobs and activity, as well as the housing that Australians need.

The property cycle is definitely turning. Beware the well-intentioned policy proposals that could drag it down further.